FEC scales back digital ad transparency rule after backlash

Federal election regulators are scaling back a major digital ad transparency measure after an effort to speed it through the regulatory process drew intense internal and external pushback, records show.

Why it matters: A little-noticed, two-word change to a proposed Federal Election Commission regulation could exempt wide swaths of digital ads from new rules designed to step up disclosure in a fast-growing segment of political advertising.

• There's still some hope for advocates of broader regulation, though, and the commission plans to take up the more expansive language next year.

How we got here: Earlier this month, the FEC proposed a rule that would force "paid for by" disclaimers on most paid political promotions online.

• The proposal was broad: it would include not just traditional video and banner ads, but also social media promotions and so-called influencer marketing efforts.
• The FEC unveiled the rule days before it was set to vote on the measure, and indicated it would be forgoing a public comment period — generally required before new regulations can be enacted.

The intrigue: Days later, the FEC pulled the proposal from its docket after outside groups criticized the lack of comment period and the breadth of its language.

• "[K]ey portions of the draft are unclear. If it’s not clear, then how will speakers who can’t afford lawyers be able to follow something they can’t understand?" wrote Brad Smith, a former FEC chairman and the founder of the Institute for Free Speech.

What's happening: A new version of the rule appeared on the FEC site on Monday, and the commission is set to consider it at a Thursday meeting.

• The previous version would impose disclosure requirements on "communications placed or promoted for a fee on another person’s website, digital device, application, service, or advertising platform."
• The new version is nearly identical, but removes "or promoted" from that standard.

Between the lines: That small change significantly reduces the scope of the regulation.

• It would no longer capture ad spending paid to, for instance, a third-party social media user for promotion on a major social platform.
• The regulation might not even capture more traditional paid advertising on platforms such as Facebook, where ads are simply traditional posts that are boosted through paid promotion.

Yes, but: The FEC docket for Thursday's meeting also includes a separate proposal that would expand its digital ad rule after the fact to include that "or promoted" language.

• But it won't be part of the proposed digital ad regulation considered this week.
• Unlike that proposed rule, it will be subject to an additional public comment period.

The bottom line: The new version of the digital ad rule is designed to make it more palatable for the notoriously fractious commission — and reduce the risk of legal challenges after the fact.

• The "or promoted" language represented the sort of substantive change that could require a new public comment period.
• That could have opened up the broader regulation to legal challenges under the Administrative Procedure Act.